Peak demand

AS the summer begins to sizzle and you reach for your air conditioner’s remote, there’s something you need to know.

A big chunk of rising energy prices is caused by surging demand on the hottest few days of the year.

In its report on electricity regulation, the Productivity Commission states that just 40 hours of peak use during the year account for a quarter of our bills.

“We invest in the capacity of the network – the poles and wires – so we’re able to turn on the air conditioning when it’s incredibly hot,” says Dr Lynne Chester, from University of Sydney. “But it’s used for a very small proportion of time.”

In the last few years, our overall demand for electricity has fallen, but the peak level continues to rise.

The reason? Air conditioning has gone through the roof. By 2020, it is forecast to double from 2000 levels.

The Productivity Commission (PDF) attributes the change to rising incomes, cheaper air conditioners, bigger new homes and the trend to install more than one unit, “particularly by higher income households”.

It’s an equity concern too: because everyone pays higher network costs, people who don’t use air conditioners at peak times are subsidising those who do.

But Dr Chester says there’s a broader problem. “As our lifestyles change, we’ve taken things like water and electricity for granted. It’s there whenever we turn on the tap and the switch.”

If we’re to avoid excess investment in the network – and the inevitable higher prices – we need to reduce peak demand first. And that means a shift away from a “predict and provide” approach to electricity, to something more complex.

Householders can expect a more active role in the way we manage energy production.

Smart meters allow electricity retailers to charge more when demand is high. “Time-of-use pricing means that when demand goes up, the price will go up,” Dr Chester says. “The most expensive time will be late in the afternoon, when the kids are home, the TV is on and you’re preparing dinner – that’s when the daily peak is occurring.”

That’s the stick approach, but there’ll be carrots too. Some retailers will alert you in advance of a critical peak, and offer discounts or incentives for switching off, if you can.

In South Australia, distributor SA Power Networks has been trialling “direct load control”, which takes the day-to-day decision out of customers’ hands. If residents agree – in exchange for $100 – they install a widget on their air conditioner and, at critical times, remotely switch off the compressor (but not the fan) for about ten minutes every half hour.

The results are significant: among participants, they’ve been able to reduce peak demand by more than one-third without people noticing any loss of comfort. To make a dent in the overall spike, however, they’d need residents to sign on in large numbers.

Dr Chester says the problem will keep growing, unless our consumption habits change. For that, we need different norms and different buildings.

“We’re treating the symptom and not the cause,” she says. “We don’t build houses with eaves and verandas, or design them for natural breezes. We’re turning on air conditioning instead.

“We’ve got to improve the efficiency of existing stock. We could start by retrofitting public housing; what better way to help low-income households improve energy efficiency and reduce energy bills?”